Head lines this week reported the Consumer Price Index (CPI) for July 2022 as rising at a 9.1 percent per year rate. The CPI is used as an indicator of inflation, and 9.1% is reaching a 40 year high, that is the highest rate since 1982. I am sure you have a burning curiosity to know from where the rate is created and other details.
The CPI is calculated by the Department of Commerce as a subset of the Census Department’s accumulation of statistics. Most are familiar with the ten year census last conducted for June 1, 2020, by which responses are taken by mail in replies, and face to face interviews. The census does calculate population, but also records much more information, including addresses, names, gender, age, parents birth origins, literacy, and more. So what does census do for the remainder of the 120 months between census? Check on consumer costs.
In August 2021, our household received a request to participate in a census of expenses for two weeks. The census would require us to save every receipt for 2 weeks, record the items and cost and report them to the census taker. Sounded easy enough, since I already save every receipt anyway. We would receive instructions, and could ask questions.
During the first of the month of September, the census taker, Mark McSpadden came to our home in Saint George to provide some forms which needed to be completed during the 2 week census period. He had a photo identification from the Department of Commerce, and was dressed business casual. The Census Department hires seasonable employees, or temporary employees to fill in when the needs arise. I don’t remember whether the taker was full time or a seasonal employee.
He explained that our address was randomly selected to participate in the census along with 14,999 other homes nationwide. This was done every month. The cost of living census meant our household represented 2500 households out of a population of 331 million Americans. I guessed that Washington County Utah would have about 10 to 20 households every month reporting their expenses. Interestingly to me, with some exceptions, everything I spent money on during the 2 weeks was to be reported. The only exception was expenses 75 miles away from our home. As it happened a trip to Cedar City is in, but to Las Vegas or Salt Lake City, both of which are more than 75 miles away would be ignored. We did go to Salt Lake City so the overnight motel stay, and meals in Salt Lake City were ignored. The date was set, and if we left town that afternoon and didn’t return for 2 weeks , it would mean we spent nothing of record for the CPI. But we were in town for 12 of the 14 days.
Another interesting aspect was that I routinely bought options and stock in the stock market (the NASDAQ) and those payments were included in the report. If we had bought a car or house in the 2 week period, those costs were in. Paid tuition, in. Paid funeral costs, in. If we made a loan to spend 15 years of wages during the 2 weeks that was in. We were to live our life, spend what we spend, and report it. Utilities, subscriptions, paid during the 2 weeks were in. Note the 2 weeks was the last half of September 2021, so costs paid at the first of the month were excluded, but if the costs were paid at the end of the month in anticipation of being due and payable on the 1st of the next month, they were in.
The detail was interesting, we reported the quantity and type of items. Say we bought carrots. Included were how many pounds, price per pound, total cost, whether the carrots were fresh or frozen. We included electricity, phone, natural gas, internet, vegetables, meat, eggs, milk, breads, fast foods, packaged food, soaps, detergents, tithing, donations, clothes, landscape, services, entertainment, water, taxes, normally made in the time frame. You can see each ticket from the grocery store was itemized. We don’t use tobacco or liquor, so that was ignored. Medical insurance copays, out of pocket, were included, but the costs covered by insurance claims were out. Insurance premiums were in, whether there was a claim that 2 weeks or not. Insurance included life, home, auto, medical, term, and warranty.
Because of the climate in Southern Utah, the last half of the month of September has lower utility costs, perhaps lowest, along with April, of the year. The desert summer heat requires substantial electrical use in the summer months for air conditioning, but the daily temperature moderates by the beginning of fall, and the winter heating costs, or natural gas heat, has not yet kicked in or winter, except for kitchen and hot water use.
We reported how many people were in the household, ages, and work status. The census taker came by after a week of the expense recording to make sure we were on board, and to answer questions. His general response was report everything and the Census department would decide what to exclude. The reporting period began September 17, 2021 and ended September 30. The taker returned to check on the records. The interviews were about an hour. Although the taker did not disclose his instructions, he was probably counseled to be affable so as not to scare off the households selected at random.
Our monthly utility bills, have a comparison of what the past month costs or usage was compared with 12 months before, and gives a running 12 month report, so the bill has a 24 month usage and cost on each bill. That is a personal mini CPI report for water, electricity, and natural gas.
The CPI is a poll of household costs during the recording period as reported by the 15,000 households in the U.S. What are the chance of being selected? For any one period, the odds are one in 2500, representing the number of homes. So the chance in a year are 2500 households divided by 12 months, or one in 208, and the chance in a decade are one in 21 (rounded).
The CPI is also a quantification of the term ‘sticker shock.’ Sticker shock is the reaction when a shopper has not purchased an item for a few years, and goes back to replace the item. The most obvious is the cost of cars or trucks, when compared with that ten year old but very reliable antique in the garage, which is associated with so many fond memories. Case in point, We bought our first family car, a brand new 1971 Ford Pinto with radio and air conditioning in Los Angeles, for $2,000. It had that new car smell and was a delight. The Pinto model, according to web sources, ran from 1971 to 1980. A current (July 14, 2022) classics autotrader.com listing shows a 1979 Pinto with 67 thousand miles offered at $16,500. Another example of ‘sticker shock’ are the bill boards for new home sales, which drop the thousands numbers and only list ‘from 300s,’ or similar amounts. The Federal Budget, which was reported to the penny in 1858, is now marked by T for trillion, and B for Billion, Millions are ignored.
Highest in 40 years is not a nomination for an award. That’s it for the CPI. If anyone reading this has participated in the CPI census, describe your experience in a comment below. ©
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